Read it and Weep

You know, a couple of years ago I met a woman who was having some trouble with the property she lived on. She and her husband had "purchased" it shortly after they were married. His best friend's father was dying of cancer, and they didn't want the property to be seized after his death, so they asked this couple -- I'll call them the Joneses -- if they wanted to buy the property. The Joneses didn't especially want that property, but they had horses and it was horse property, and so they bought it. The father charged them 9% interest and carried the contract (they argued him down from 12%), which is hard to believe. He was swindling them from his deathbed. Anyway, later he died.

Well, he never signed the paperwork because he passed away, so they called his wife to get her signature, and she said she was too upset to sign but that she would do so after things settled down. Well, a few weeks turned into a few months and a few months turned into a few years. The Joneses moved onto the property, bought a manufactured home, put in a septic system and ran electricity onto the property.

Then interest rates began to drop and the property, originally sold for around $35,000, rose in value. The improvements helped, and suddenly this little property had more than tripled in value, and the family they bought it from continued to give excuse after excuse as to why they couldn't sign the contract. The Joneses were ready to cash in on their investment and move into town, but they couldn't, despite having made a mortgage payment every month.

I advised my friends to consult a lawyer and finally they did. By the time they did so, however, the IRS had put a lien on the property for tax evasion from the family, and suddenly my friends were between a rock and a hard place. The lawyer looked at what they had, declared it worthless and told them to leave the property and start afresh. They did. The family they "bought" the property from had the audacity to call and scream at them for "leaving her with a worthless piece of land." Yes, worthless now, since the IRS was taking it.

The problem here was easy; nobody signed any contracts. Herein lies lesson number one: SIGN THE CONTRACT. ALL PARTIES MUST SIGN THE CONTRACT.

Next story.

A year or two passes and I make another friend, who has bought a piece of property from her sister-in-law (these are all true stories). The problem is, her sister-in-law bought it from father-in-law, and didn't have the title "just yet, but it's on it's way." Now these friends, whom I will call the Smiths, made up a contract and everyone signed it, but it wasn't signed by the person who actually owned the property. Also, the contract was never recorded and made official. Now the Smiths are actually very good with their money, they are just a little soft-hearted. They paid double and triple their mortgage to the sister-in-law and in just five years, paid off the mortgage. Problem is, that title is still "just about here." Later they found out the sister-in-law had a serious alcohol problem and nobody knows where the money went. They are continuing to stay on the property and hope for the best, but they are technically squatters because not only do they not have the title, they have never paid any money to the rightful owner of the property. They essentially paid someone who said she owned the property without any proof of ownership.

Lesson Number 2: MAKE SURE THE PEOPLE SIGNING THE CONTRACT ARE THE PEOPLE ACTUALLY INVOLVED AS OWNER AND SELLER.

Next story.

Fast forward another year and I make another friend. I will call her "Carolyn," since I don't know anyone by that name. Carolyn has been working for the company for 27 years and makes good money. Her husband makes six figures and between them, they should be very well off in Tucson. But Carolyn doesn't like to tell her children "no," and so instead of affluent they are $50,000 in debt with credit cards and living paycheck to paycheck.

Carolyn's middle son is a smart guy but not very practical. He goes to college and runs up $800 in parking tickets, for example, because he can't be bothered to park where he's supposed to. He decides to go overseas and takes out additional student loans (as did I, so I can't lay blame there). He wants to be a lawyer but already has $40,000 in student loans by the time he graduates, so he decides to join the military. They promise to pay his student loans and to give him a sign-on bonus, and he decides to enlist rather than become an officer because of a particular position he can only get as an enlisted soldier.

Middle Son (MS) graduates college and ships off to boot camp. About 2 weeks later Carolyn gets a frantic call. Two things happen:
1. The military takes his paperwork, including his contract, and he has no backup copy, and;
2. The contract now says nothing about paying $40,000 in student loans.

Carolyn is frantic. She realizes that MS never actually read the contract; neither did she or her husband. She raves at work, "Who reads an entire contract? Did you read your contract when you bought your house?" I hate it, but I nod -- Yes, I did.

Lesson Number 3: READ THE CONTRACT. READ ALL OF IT.

I will continue this in the next post.